* Quarterly profit 77 cts/shr vs Street view 76 cts
* North America direct sales up 11 percent
* Shares rise nearly 7 percent in morning trade
By Phil Wahba
Oct 23 Upscale leather-goods maker Coach Inc
on Tuesday reported strong quarterly sales growth at its
North American stores and big gains in China, regaining momentum
in two key markets and sending its shares up nearly 7 percent.
Sales at its stores in North America - still the company's
biggest market by far - rose 11 percent. In China, a small but
fast-growing market for Coach, sales at stores open at least a
year also jumped by a double-digit percentage.
That follows two straight quarters in which the pace of
Coach's North American sales growth slowed considerably.
Coach shares are down from a March high of $79.64. Concerns
about the company were compounded when Western luxury brands
such as Tiffany & Co and Burberry Group PLC
recently warned about slowing growth in China.
So-called "affordable luxury" brands need China to fuel
Chinese shoppers' appetite for affordable prices worked in
Coach's favor, Chief Executive Lew Frankfort said in an
interview. "Our price points are extremely compelling relative
to the European luxury brands," he told Reuters.
Sales in China were "better than feared," Lazard Capital
Markets analyst Jennifer Davis said in a note.
Coach's performance was not enough to buoy shares of U.S.
rivals also courting Asian shoppers. Ralph Lauren Corp
shares were down 2.5 percent, while Tiffany was off 2.1 percent.
Consulting firm Bain & Co last week forecast global luxury
sales growth would slow sharply to 5 percent this year from 13
percent in 2011 as Chinese and European consumers cut spending.
GETTING SOME STEAM BACK
In North America, Coach's results in its fiscal first
quarter, ended Sept. 29, were an improvement over the two
preceding quarters, when gains were anemic. This time,
comparable sales rose 5.5 percent, above Coach's own forecast
from three months ago, when it warned that shoppers wanted to
see bargains at its factory stores before they would buy.
Coach, which operates 354 full-service stores and 174
factory outlets, experimented during the quarter with social
media by offering a coupon through Facebook, prompting concerns
among some Wall Street analysts that promotions of some kind
were needed even at full-service stores.
Coach has also faced competition in its home market from
fast-growing brands including Michael Kors and Fifth &
Pacific Cos Inc's kate spade, prompting questions about
how sustainable Coach's strength would be.
Companywide, revenue in the first quarter rose 10.6 percent
to $1.16 billion, in line with analysts' average forecast,
according to Thomson Reuters I/B/E/S.
Frankfort said in a statement that the launch of its Legacy
handbag collection, a line that harkens back to classic styles
from the 71-year-old company, had been successful.
Net income in the quarter rose to $221.4 million, or 77
cents per share, from $215 million, or 73 cents per share, a
year earlier. Earnings per share were a penny above the average
Wall Street estimate.
Profit was dented by the company's efforts to buy its local
distributors in Malaysia and Korea.